CONTRAFECT CORPORATION You should read the following discussion and analysis of our financial condition in conjunction with the information set forth in our financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year endedDecember 31, 2020 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed by us with theSecurities and Exchange Commission ("SEC") onMarch 30, 2021 . Overview We are a clinical-stage biotechnology company focused on the discovery and development of direct lytic agents (DLAs), including lysins and amurin peptides, as new medical modalities for the treatment of life-threatening, antibiotic-resistant infections. Antibiotic-resistant infections account for 2,000,000 illnesses inthe United States and 700,000 deaths worldwide each year. We intend to address antibiotic-resistant infections using product candidates from our lysin and amurin peptide platforms. DLAs are fundamentally different than antibiotics and offer a potential paradigm shift in the treatment of antibiotic-resistant infections. Lysins are recombinantly-produced enzymes, that when applied to bacteria cleave a key component of the target bacteria's peptidoglycan cell wall, resulting in rapid bacterial cell death. In addition to the speed of action and potent cidality, we believe lysins are differentiated by their other hallmark features, which include the demonstrated ability to eradicate biofilms and synergistically boost the efficacy of conventional antibiotics in animal models. Lysins that target Staph aureus and other gram-positive pathogens tend to have a "targeted spectrum," meaning they kill only specific species of bacteria or closely related bacteria. Amurin peptides are a new class of direct lytic agents, discovered in our laboratories, which disrupt the outer membrane of gram-negative bacteria, resulting in rapid bacterial cell death, offering a distinct mechanism of action from lysins. Amurins have shown potent "broad spectrum" in vitro activity against a wide range of gram-negative pathogens in, including deadly, drug-resistant Pseudomonas aeruginosa (" P. aeruginosa" ), Klebsiella pneumoniae, Escherichia coli, Acinetobacter baumannii and Enterobacter cloacae bacteria species as well as difficult to treat pathogens such as Stenotrophomonas, Achromobacter and some Burkholderia species. The highly differentiated properties of DLAs have shown these agents to be complementary to and synergistic with conventional antibiotics enabling the potential use of these agents in addition to traditional antibiotics with the goal of improving clinical outcomes compared to conventional antibiotics alone. The development of these compounds involves a novel clinical and regulatory strategy, using superiority design clinical trials with the goal of delivering significantly improved clinical outcomes for the treatment of serious, antibiotic-resistant bacterial infections, including biofilm-associated infections. This approach affords potential clinical benefits to patients as well as the potential ability to mitigate against further development of antibiotic resistance. We have not generated any revenues and, to date, have funded our operations primarily through our initial public offering ("IPO"), our follow-on public offerings, private placements of securities, and grant funding received. OnMarch 22, 2021 , we completed an underwritten public offering of 11,500,000 shares of our common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public offering price of$5.00 per share of common stock, resulting in net proceeds of approximately$53.8 million after underwriting discounts and commissions and offering expenses payable by us. OnMarch 10, 2021 , we executed a cost-share contract (the "BARDA Contract") with theBiomedical Advanced Research and Development Authority ("BARDA"), part of theOffice of the Assistant Secretary for Preparedness and Response at theU.S. Department of Health and Human Services . Under the terms of the BARDA Contract, the Company will receive$9.8 million in initial funding and up to an additional$77.0 million . The initial funding will be used to support our ongoing pivotal Phase 3 DISRUPT superiority trial of exebacase. Under the terms of the agreement, and if supported by Phase 3 DISRUPT study data, BARDA may provide the Company with additional funding upon achievement of key milestones to continue the advancement of exebacase through FDA product approval and completion of post-approval commitments. The BARDA Contract contains terms and conditions that are customary for contracts with BARDA of this nature, including provisions giving the government the right to terminate the contract at any time for its convenience. As a government contractor, we are subject to complex and wide-ranging federal and agency-specific regulations and contractual requirements. The costs of compliance with these requirements may be significant. Failure to comply with government contracting requirements could result in termination of our contract or the imposition of penalties. We have never been profitable and our operating loss for the nine months endedSeptember 30, 2021 was$15.9 million . Our net losses were$28.2 million and$12.8 million for the years endedDecember 31, 2020 and 2019, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as we advance our product candidates through preclinical activities and clinical trials to seek regulatory approval and, if approved, commercialize such product candidates. Accordingly, we will need additional financing to support our continuing operations. We expect to seek to fund our operations through public or private equity, debt financings, equity-linked financings, collaborations, strategic alliances, licensing arrangements, research grants or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so. 18 -------------------------------------------------------------------------------- Table of Contents The ongoing COVID-19 pandemic has presented substantial public health challenges and is impacting the global healthcare system, including the conduct of clinical trials in theU.S. and other parts of the world. Healthcare resources, including the staff required to support the conduct of clinical trials, are being diverted away from the conduct of clinical trials other than COVID-19 studies at hospitals serving as clinical trial sites. There are also operational impacts on local, regional and national CROs, manufacturers and other vendors and suppliers and an intermittent lack of availability of certain raw materials and consumables for manufacturing. While global infection rates have significantly reduced from their peak during 2020, new variants continue to circulate, and uncertainty remains as to whether additional restrictions may be implemented to address the spread of new variants. The pandemic has had an impact, both directly and indirectly, on the Company. We adjusted our business operations, with a majority of our employees working remotely. We have continued to enroll patients in our Phase 3 DISRUPT superiority study of exebacase throughout the entire ongoing COVID-19 pandemic. However, as the situation worsened across the country earlier this year with new variants circulating and the number of COVID-19 infections and hospitalizations increased rapidly, we experienced effects on our trial, and our patient enrollment rate slowed during certain months. We continue with efforts to increase the rate of patient enrollment, such as providing additional site monitoring support and allowing patients the option of conducting certain follow-up study visits remotely. These efforts may not be effective and the progress of the study may be adversely affected. As the pandemic continues to evolve, we will continue to evaluate the impact of variable monthly patient enrollment rates on the timing of conducting the interim futility analysis and fully completing the trial. The full extent of the impact on our business, results of operations, financial condition and liquidity, including expenses, research and development, manufacturing costs and timelines, and clinical trial progress, depends on future developments that remain highly uncertain. Financial Operations Overview Revenue We have not generated any revenues to date. In the future, we may generate revenues from product sales. In addition, to the extent we enter into licensing or collaboration arrangements, we may have additional sources of revenue. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the amount and timing of payments that we may recognize upon the sale of our products, to the extent that any products are successfully commercialized, and the amount and timing of fees, reimbursements, milestone and other payments received under any future licensing or collaboration arrangements. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected. Research and development expenses Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses, including salaries, performance bonuses, benefits, travel and non-cash stock-based compensation expense;
• external research and development expenses incurred under arrangements
with third parties such as contract research organizations, or CROs,
contract manufacturers, consultants and academic institutions; and
• facilities and laboratory and other supplies.
We expense research and development costs to operations as incurred. We account
for
non-refundable
advance payments for goods and services that will be used in future research and
development activities as expenses when the service has been performed or when
the goods have been received, rather than when the payment is made.
The following summarizes our most advanced current research and development
programs.
Exebacase
Our most advanced clinical candidate, exebacase, is an investigational novel
lysin that targets
Staphylococcus aureus
("
Staph aureus")
, including methicillin-resistant ("MRSA") strains, which causes serious
infections such as bacteremia, pneumonia and osteomyelitis.
Staph aureus
is also a common cause of biofilm-associated infections of heart valves
(endocarditis), prosthetic joints, indwelling devices and catheters. These
infections result in significant morbidity and mortality despite currently
available antibiotic therapies.
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In December 2019 , we initiated the Phase 3 DISRUPT (Direct Lysis of
Staph aureus
Resistant Pathogen Trial) study of exebacase. The DISRUPT study is a randomized,
double-blind, placebo-controlled Phase 3 clinical trial conducted in the U.S.
alone to assess the efficacy and safety of exebacase in approximately 350
patients with
Staph aureus
bacteremia, including right-sided endocarditis. Patients entering the study will
be randomized 2:1 to either exebacase or placebo, with all patients receiving
standard-of-care
("SOC") antibiotics. The primary efficacy endpoint of the study is clinical
response at Day 14 in patients with MRSA bacteremia, including right-sided
endocarditis. Secondary endpoints will include clinical response at Day 14 in
the All
Staph aureus
patient group (MRSA and methicillin-sensitive
Staph aureus
("MSSA")),
30-day
all-cause
mortality in MRSA patients, and clinical response at later timepoints. We will
also evaluate the impact of treatment with exebacase on health resource
utilization, including hospital length of stay, ICU length of stay and
30-day
readmission rates. We plan to conduct an interim futility analysis following the
enrollment of approximately 60% of the study population. We obtained concurrence
with the U.S. Food and Drug Administration ("FDA") on the Phase 3 study protocol
at an
End-of-Phase
2 meeting with the FDA in September 2019 , including the key design features of
the study population, the endpoints and the size of the safety database that
would be needed to support a Biologics License Application ("BLA") for approval
of exebacase, under the FDA's "streamlined development" paradigm for agents to
treat bacterial infections associated with high unmet medical need.
We completed a Phase 2 superiority study of exebacase that evaluated its safety,
tolerability, efficacy and pharmacokinetics ("PK") when used in addition to
background SOC antibiotics compared to SOC antibiotics alone for the treatment
of
Staph aureus
bacteremia, including endocarditis in adult patients. The results from this
study showed clinically meaningful improvement in clinical responder rates among
patients treated with exebacase in addition to SOC antibiotics compared to SOC
antibiotics alone. In the primary efficacy analysis population of 116 patients
with documented
Staph aureus
bacteremia, including endocarditis, who received a single intravenous
("IV") infusion of blinded study drug, the clinical responder rate at Day 14 was
70.4% for patients treated with exebacase and 60.0% for patients dosed with SOC
antibiotics alone (p=0.314). The clinical responder rate at Day 14 in the subset
of patients with bacteremia including right-sided endocarditis was 80.0% for
patients treated with exebacase compared to 59.5% for patients treated with SOC
antibiotics alone, an increase of 20.5% (p=0.028). In the subset of patients
with bacteremia alone, the clinical responder rate at Day 14 was 81.8% for
patients treated with exebacase compared to 61.5% for patients treated with SOC
antibiotics alone, an increase of 20.3% (p=0.035).
In a
pre-specified
analysis of MRSA-infected patients, the clinical responder rate at Day 14 in
patients treated with exebacase was nearly
43-percentage
points higher than in patients treated with SOC antibiotics alone (74.1% for
patients treated with exebacase compared to 31.3% for patients treated with SOC
antibiotics alone (p=0.010)). In addition to the higher rate of clinical
response, MRSA-infected patients treated with exebacase showed a
21-percentage
point reduction in
30-day
all-cause
mortality (p=0.056), a four day lower median length of hospital stay and
meaningful reductions in hospital readmission rates. Exebacase was
well-tolerated and treatment emergent adverse events, including serious
treatment-emergent serious adverse events ("SAEs") were balanced between the
treatment groups. There were no SAEs that we determined to be related to
exebacase, there were no reports of hypersensitivity related to exebacase and no
patients discontinued treatment with study drug in either treatment group.
We also performed a
post-hoc
Phase 3 simulation analysis using the Phase 2 data to evaluate the clinical
outcomes for the Phase 2 patient population that would meet the Phase 3
inclusion criteria. In this simulated Phase 3 analysis population of 84 U.S.
patients with documented
Staph aureus
bacteremia, including right-sided endocarditis, who received a single
IV infusion of blinded study drug, the clinical responder rate at Day 14 was
83.7% for patients treated with exebacase and 54.3% for patients dosed with SOC
antibiotics alone, an improvement in the responder rate of over
29-percentage
points. The clinical responder rate at Day 14 in the subset of patients with
MRSA bacteremia including right-sided endocarditis was 82.6% for patients
treated with exebacase compared to 33.3% for patients treated with SOC
antibiotics alone, an improvement in the responder rate of over
49-percentage
points. In the subset of patients with MSSA bacteremia including right-sided,
the clinical responder rate at Day 14 was 84.6% for patients treated with
exebacase compared to 66.7% for patients treated with SOC antibiotics alone, an
increase of nearly
18-percentage
points.
We believe these data established proof of concept for exebacase and for DLAs as
therapeutic agents. In particular, the data for MRSA-infected patients treated
with exebacase, which, in the Phase 2 superiority study, demonstrated superior
outcomes in clinical response at Day 14 and in
30-day
all-cause
mortality as well as health economics benefits, provided the basis for the FDA
to grant Breakthrough Therapy designation to exebacase for the treatment of MRSA
bloodstream infections (bacteremia), including right-sided endocarditis, when
used in addition to SOC anti-staphylococcal antibiotics in adult patients.
Breakthrough Therapy designation is a program designed by the FDA to expedite
the development and review of medicines for serious or life-threatening diseases
where preliminary clinical evidence suggests that the investigational therapy
may demonstrate substantial improvement on at least one clinically significant
endpoint over available therapies. The Breakthrough Therapy designation provides
additional benefits, such as expedited meetings and interactions with the FDA
and the potential for priority review, over the Fast Track designation granted
to exebacase in August 2015 .
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On March 10, 2021 , we entered into a cost-share contract (the "BARDA Contract")
with BARDA, a division of the U.S. Department of Health and Human Services'
Office of the Assistant Secretary for Preparedness and Response. Under the BARDA
Contract, we will receive funding of up to an estimated $86.8 million to advance
the development of exebacase. The base period for the BARDA Contract includes
government funding of up to $9.8 million to reimburse expenses for approximately
one year to support the conduct of the ongoing Phase 3 clinical trial and
futility analysis. Following successful completion of the base period, the BARDA
Contract provides for approximately $77.0 million of additional BARDA funding
for five option stages in support of the completion of the Phase 3 clinical
trial of exebacase, further clinical and
non-clinical
studies, manufacturing, supply chain, clinical, regulatory and administrative
activities. The contract
period-of-performance
(base period plus option exercises) is up to approximately six years. The BARDA
Contract contains terms and conditions that are customary for contracts with
BARDA of this nature, including provisions giving the government the right to
terminate the contract at any time for its convenience.
In addition to the ongoing Phase 3 DISRUPT study of exebacase, we initiated an
expanded access program to provide exebacase for the treatment of persistent
bacteremia caused by MRSA in
COVID-19
patients and continued the investigator-initiated early access program for
compassionate use of exebacase for individual named patients with chronic
post-operative prosthetic joint infections ("PJIs") under Temporary
Authorizations for Use from the French National Agency for Medicines and Health
Products Safety in collaboration with Dr. Tristan Ferry at the Hôpital de la
Croix Rousse in Lyon, France .
Other Programs
We have made further advancements with our novel lytic agents across our
portfolio. We have developed a novel, engineered variant of exebacase, known as
CF-296,
which we believe provides an additional opportunity to advance a potential
targeted therapy for deep-seated, invasive biofilm-associated
Staph aureus
infections. We are conducting further
in vitro
and
in vivo
characterization of
CF-296
to evaluate the full profile of this compound. An analysis of bone samples from
a study of
CF-296
in a preclinical rodent model of acute MRSA osteomyelitis demonstrated that
CF-296
has potent anti-staphylococcal activity and, when used with daptomycin, is
active and well tolerated in MRSA acute osteomyelitis. Studies conducted in a
preclinical murine
Staph aureus
infection model demonstrated the efficacy of
CF-296,
both as a mono therapy and in addition to
standard-of-care
antibiotics. The addition of
CF-296
to both daptomycin or vancomycin resulted in significantly enhanced
antibacterial activity in the model, relative to the activity of these
standard-of-care
antibiotics alone. In June 2019 , we were awarded up to $7.2 million of funding
from the Military Infectious Diseases Research Program, United States Army
Medical Research and Development Command ("USAMRDC") over the course of three
years to advance
CF-296
through Investigational New Drug application ("IND")-enabling studies.
We have discovered and engineered a new lysin product candidate,
CF-370,
which in preclinical studies has demonstrated potent activity against
antibiotic-resistant
P. aeruginosa
bacteria, a major cause of morbidity and mortality in patients with hospital
acquired pneumonia and a major medical challenge for patients with cystic
fibrosis. In July 2020 , we were awarded up to $18.9 million in funding from
CARB-X
(Combating Antibiotic-Resistant Bacteria Biopharmaceutical Accelerator),
including initial funding of $4.9 million , in support of the advancement of
CF-370
through
IND-enabling
activities toward future Phase 1 clinical trials. We expect
CF-370
to be our next molecule in clinical studies. In April 2021 , the United States
Patent and Trademark Office issued U.S. Patent No. 10,988,520 for
CF-370.
This patent, which is owned solely by the Company, expires in March 2039 , and is
the latest U.S. patent to issue from the Company's DLA patent portfolio.
Beyond our lysin programs, we continue our research to advance potential product
candidates from our amurin peptide platform. We are evaluating our most
promising amurins in preclinical animal studies with the goals of determining
our next product candidate and moving this program towards clinical studies as
soon as possible. We have received approximately $1.6 million of funding from
CARB-X
to support the amurin peptide program.
In addition, we have recently completed an initial funding agreement with the
Cystic Fibrosis Foundation to investigate the potential utility of DLAs,
including
CF-370
and amurin peptides, against resistant Gram-negative pathogens which afflict
Cystic Fibrosis ("CF") patients. The agreement provided funding for the
determination of the
in vitro
activity of
CF-370
and amurin peptides against bacterial specimens obtained from CF patients at
different stages of disease. Having demonstrated potent activity of its agents
against resistant Gram-negative pathogens isolated in samples from the lungs of
CF patients, ContraFect is evaluating the potential future clinical development
of
CF-370
and/or amurin peptides as therapeutic candidates for the treatment of pulmonary
infections in patients with CF.
To date, a large portion of our research and development work has related to the
establishment of our platform technologies, the advancement of our research
projects to discovery of clinical candidates, manufacturing and preclinical
testing of our clinical candidates and clinical testing of exebacase. We
currently expect to focus the majority of our resources on the exebacase
program. As our pipeline progresses, we are able to further leverage our
employee and infrastructure resources across multiple development programs as
well as research projects. For the three months ended September 30, 2021 and
2020, we recorded approximately $8.7 million and $4.7 million , respectively, of
research and development expenses and for the nine months ended September 30,
2021 and 2020, we recorded approximately $24.5 million and $15.4 million ,
respectively, of research and development expenses. A breakdown of our research
and development expenses by category is shown below. We do not currently utilize
a formal time or laboratory project expense allocation system to allocate
employee-related expenses, laboratory costs or depreciation to any particular
project. Accordingly, we do not allocate these expenses to individual projects
or product candidates. However, we do allocate some portions of our research and
development expenses in the product development, external research and licensing
and professional fees categories to exebacase as shown below.
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The following table summarizes our research and development expenses by category
for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Product development $ 7,842 $ 2,711 $ 19,970 $ 10,691
Personnel related 2,357 1,176 6,270 3,201
Professional fees 879 903 2,701 2,710
External research and licensing costs 599 340 1,357 661
Laboratory costs 433 394 1,132 1,023
Stock-based compensation 264 166 710 493
Expenses reimbursed by grants (3,710 ) (984 ) (7,678 ) (3,425 )
Total research and development expense
The following table summarizes our research and development expenses by program for the three and nine months endedSeptember 30, 2021 and 2020 (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Exebacase$ 6,321 $ 2,646 $ 15,862 $ 10,156 CF-370 1,164 406 3,307 1,014 Other research and development 2,268 1,296 5,991 3,915 Personnel related and stock-based compensation 2,621 1,342 6,980 3,694 Expenses reimbursed by grants (3,710 ) (984 )
(7,678 ) (3,425 )
Total research and development expense$ 8,664 $ 4,706
We anticipate that our research and development expenses will increase substantially in connection with the commencement of additional clinical trials for our product candidates. However, the successful development of future product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
• the scope, rate of progress and expense of our research and development
activities;
• clinical trial results;
• the terms and timing of regulatory approvals;
• our ability to market, commercialize and achieve market acceptance for
our product candidates in the future; and
• the expense, filing, prosecuting, defending and enforcing of patent
claims and other intellectual property rights.
A change in the outcome of any of these variables with respect to the
development of exebacase or any other product candidate that we may develop
could mean a significant change in the costs and timing associated with the
development of exebacase or any such product candidate. For example, if the FDA
or other regulatory authority were to require us to conduct clinical trials
beyond those which we currently anticipate will be required for the completion
of clinical development of exebacase or if we experience significant delays in
enrollment in any clinical trials of exebacase, we could be required to expend
significant additional financial resources and time on the completion of the
clinical development of exebacase.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
costs for personnel, including
non-cash
stock-based compensation expense, in our executive, finance, legal, human
resource and business development functions. Other general and administrative
expenses include facility costs, insurance expenses and professional fees for
legal, consulting and accounting services.
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We anticipate that our general and administrative expenses will increase in
future periods to support increases in our research and development activities
and as a result of increased headcount, expanded infrastructure, increased
legal, compliance, accounting and investor and public relations expenses
associated with being a public company and increased insurance premiums, among
other factors.
Other Income (Expense)
Other income (expense) may consist of changes in the fair values of our warrant
liabilities, offering expenses related to the issuance of warrants, and interest
income earned on our cash and cash equivalents and marketable securities.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which we have prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities and expenses and the
disclosure of contingent assets and liabilities in our financial statements. On
an ongoing basis, we evaluate our estimates and judgments. We base our estimates
on our limited historical experience, known trends and events and various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
During the nine-month period ended September 30, 2021 , there have been no
material changes to our critical accounting policies from the information
provided in the section "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in our Annual Report on
Form 10-K
for the year ended December 31, 2020 filed by us with the SEC on March 30, 2021
.
Results of Operations
The following table summarizes key components of our results of operations for
the periods indicated (in thousands).
Three Months
Ended Nine Months Ended
September 30, September 30,
2021 2020 Dollar Change 2021 2020 Dollar Change
Operating expenses:
Research and development $ 8,664 $ 4,706 $ 3,958 $ 24,462 $ 15,354 $ 9,108
General and administrative $ 3,022 $ 2,607 $ 415 $ 8,722 $ 8,186 $ 536
Other income, net $ 6,394 $ 10,757 $ (4,363 ) $ 17,301 $ 1,789 $ 15,512
Comparison of Three Months Ended September 30, 2021 and 2020
Research and Development Expenses
Research and development expenses were $8.7 million for the three months ended
September 30, 2021 compared with $4.7 million for the three months ended
September 30, 2020 , an increase of $4.0 million . This increase was primarily
attributable to a $1.4 million increase in CRO and investigator site expenses
related to the execution of the Phase 3 clinical study, a $1.3 million increase
in expenditures for
non-clinical
studies of exebacase,
CF-370,
CF-296
and the amurin peptides, as all programs continued to progress forward, and a
$1.1 million increase in clinical development and manufacturing headcount and
related personnel costs to support the ongoing development of exebacase.
General and Administrative Expenses
General and administrative expenses were $3.0 million for the three months ended
September 30, 2021 compared with $2.6 million for the three months ended
September 30, 2020 , an increase of $0.4 million . This increase was primarily
attributable to an increase of $0.6 million in administrative personnel and
insurance costs. This increase was partially offset by a $0.2 million decrease
in legal expenses.
Other Income, Net
Other income was $6.4 million for the three months ended September 30, 2021
compared with $10.8 million for the three months ended September 30, 2020 , a
decrease of $4.4 million . The decrease in other income relates primarily to the
non-cash
gain of $6.3 million in the current year period compared to a
non-cash
gain of $10.7 million in the prior year period, resulting from the change in
fair value of our warrant liabilities in each reporting period.
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Comparison of Nine Months Ended September 30, 2021 and 2020
Research and Development Expenses
Research and development expenses were $24.5 million for the nine months ended
September 30, 2021 compared with $15.4 million for the nine months ended
September 30, 2020 , an increase of $9.1 million . This increase was primarily
attributable to a $4.6 million increase in expenditures for
non-clinical
studies of exebacase,
CF-370,
CF-296
and the amurin peptides, as all programs continued to progress forward, a
$4.2 million increase in CRO and investigator site expenses related to the
execution of the Phase 3 clinical study, and a $3.1 million increase in clinical
development and manufacturing headcount and related personnel costs to support
the ongoing development of exebacase. These increases were partially offset by a
$2.7 million increase in expenses that are reimbursable under our BARDA contract
and other grants compared to the prior year period.
General and Administrative Expenses
General and administrative expense was $8.7 million for the nine months ended
September 30, 2021 , compared with $8.2 million for the nine months ended
September 30, 2020 , an increase of $0.5 million . This increase was primarily
attributable to increases of $0.7 million in administrative personnel costs and
professional fees, $0.5 million in insurance costs and local tax expenses. These
increases were partially offset by a $0.7 million decrease in legal expenses.
Other Income, Net
Other income was $17.3 million for the nine months ended September 30, 2021 ,
compared with $1.8 million for the nine months ended September 30, 2020 , an
increase of $15.5 million . The increase in other income relates primarily to the
non-cash
gain of $17.2 million in the current year period compared to a
non-cash
gain of $3.8 million in the prior year period, resulting from the change in fair
value of our warrant liabilities at each reporting period. In addition, the
prior year period had a charge to other expense of $2.2 million for issuance
expenses allocated to warrants, for which there was no such expense in the
current year period.
Liquidity and Capital Resources
Sources of Liquidity
We have financed our operations to date primarily through proceeds from sales of
common stock, common stock and warrants, convertible preferred stock and
convertible debt and, to a lesser extent, grant funding. To date, we have not
generated any revenue from the sale of products. We have incurred losses and
generated negative cash flows from operations since inception.
Since the date of our initial public offering, we have funded our operations
through the sale of registered securities for gross proceeds of $257.8 million ,
$9.6 million from the exercise of the Class B Warrants issued in our IPO,
$26.0 million from the sale of securities in private placements and the receipt
of $13.1 million of grant funding.
As of September 30, 2021 , we had approximately $63.3 million in cash, cash
equivalents and marketable securities.
On August 14, 2020 , we filed a new shelf registration statement on Form
S-3
(the "Form
S-3")
with the SEC . The Form
S-3
was declared effective by the SEC on August 31, 2020 . The Form
S-3
allows us to offer and sell from
time-to-time
up to $150.0 million of common stock, preferred stock, debt securities, warrants
or units comprised of any combination of these securities. On March 22, 2021 , we
completed an underwritten public offering under the Form
S-3
of 11,500,000 shares of our common stock, including shares sold pursuant to the
fully exercised overallotment option granted to the underwriters in connection
with the offering, at a public offering price of $5.00 per share of common
stock, resulting in net proceeds of approximately $53.8 million after
underwriting discounts and commissions and offering expenses payable by us. The
terms of any future offerings under the Form
S-3
will be established at the time of such offering and will be described in a
prospectus supplement filed with the SEC prior to the completion of any such
offering. There can be no assurances that any such financing will be available
to us on satisfactory terms, or at all.
We have also been successful obtaining grants to supplement our financings with
non-dilutive
funding, including grants from
CARB-X,
USAMRDC and our cost-sharing contract with BARDA. We may continue to pursue
further
non-dilutive
funding opportunities. In addition, there can be no assurances that either
BARDA,
CARB-X
or USAMRDC will provide the maximum potential funding to the Company.
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Cash Flows
The following table provides information regarding our cash flows for the nine
months ended September 30, 2021 and 2020 (in thousands):
Nine Months Ended
September 30,
2021 2020
Net cash (used in) provided by:
Operating activities $ (32,557 ) $ (25,672 )
Investing activities $ (16,610 ) $ (32,252 )
Financing activities $ 53,907 $ 51,892
Net cash used in operating activities
Net cash used in operating activities resulted primarily from our net losses
adjusted for
non-cash
charges and changes in the components of working capital. Net cash used in
operating activities for the nine months ended September 30, 2021 increased by
$6.9 million compared to the same period in 2020, due primarily to payment of
amounts owed to our contract research and manufacturing organizations in support
of the exebacase development program including our Phase 3 DISRUPT trial.
Net cash used in investing activities
Net cash used in investing activities for the nine months ended September 30,
2021 and 2020 were driven by the purchases of marketable securities, less
proceeds received from the maturities of marketable securities.
Net cash provided by financing activities
Net cash provided by financing activities for the nine months ended
September 30, 2021 resulted from the $53.8 million of net proceeds from our
March 22, 2021 offering of securities and $0.1 million of proceeds from the
exercise of warrants. Net cash provided by financing activities for the nine
months ended September 30, 2020 resulted from the $51.9 million of net proceeds
from our May 27, 2020 offering of securities.
Funding Requirements
All of our product candidates are in clinical or preclinical development. We
expect to continue to incur significant expenses and increasing operating losses
for the foreseeable future. We anticipate that our expenses will increase
substantially if and as we:
• continue our ongoing clinical trials, and initiate the planned clinical
trials of our product candidates;
• continue our ongoing preclinical studies, and initiate additional
preclinical studies, of our product candidates;
• continue the research and development of our other product candidates and
our platform technology;
• seek to identify additional product candidates;
• acquire or
in-license
other products and technologies;
• seek marketing approvals for our product candidates that successfully
complete clinical trials;
• establish, either on our own or with strategic partners, a sales,
marketing and distribution infrastructure to commercialize any products
for which we may obtain marketing approval;
• maintain, leverage and expand our intellectual property portfolio; and
• add operational, financial and management information systems and
personnel, including personnel to support our product development and
future commercialization efforts.
We believe that our existing cash, cash equivalents and marketable securities
will be sufficient to fund operations for at least 12 months from the issuance
date of these financial statements. We have based this estimate on assumptions
that may prove to be wrong, and we could use our available capital resources
sooner than we currently expect. Because of the numerous risks and uncertainties
associated with the development and commercialization of our product candidates,
and the extent to which we may enter into collaborations with third parties for
development and commercialization of our product candidates, we are unable to
estimate the amounts of increased capital outlays and operating expenses
associated with completing the development of our current product candidates. We
plan to continue to fund our operations through public or private debt and
equity financings and grant funding but there can be no assurances that such
financing or grants will be available to us on satisfactory terms, or at all.
Our future capital requirements will depend on many factors, including:
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• the progress and results of the clinical trials of our lead product
candidates;
• the scope, progress, results and costs of compound discovery, preclinical
development, laboratory testing and clinical trials for our other product
candidates;
• the ongoing effects of
COVID-19
on, among other things, our clinical trials, manufacturing and sourcing
of raw materials, financial performance, business and operations;
• the extent to which we acquire or
in-license
other products and technologies;
• the timing and amount of actual reimbursements under the BARDA Contract;
• the costs, timing and outcome of regulatory review of our product
candidates;
• the costs of future commercialization activities, including product
sales, marketing, manufacturing and distribution, for any of our product
candidates for which we receive marketing approval;
• revenue, if any, received from commercial sales of our productcandidates, should any of our product candidates receive marketing
approval;
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims; and
• our ability to establish any future collaboration arrangements on
favorable terms, if at all.
Until such time, if ever, as we can generate substantial product revenues, we
expect to finance our cash needs through a combination of equity and debt
offerings, collaborations, grants, government contracts, strategic alliances and
licensing arrangements. We do not have any committed external source of funds.
To the extent that we raise additional capital through the sale of equity or
other securities, the ownership interest of our stockholders will be diluted,
and the terms of these securities may include liquidation or other preferences
that adversely affect your rights as a common stockholder. Debt financing, if
available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. If we raise additional funds
through collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies, future
revenue streams, research programs or product candidates or grant licenses on
terms that may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings when needed, we may be required to
delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.
We incur significant costs as a public company, including, but not limited to,
increased personnel costs, increased directors fees, increased directors and
officers insurance premiums, audit and legal fees, investor relations and
external communications fees, expenses for compliance with the Sarbanes-Oxley
Act and rules implemented by the SEC and Nasdaq and various other costs and
expenses.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and
commitments outside the ordinary course of business from those disclosed under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations- Contractual Obligations and Commitments" in our Annual
Report on
Form 10-K
filed with the SEC on March 30, 2021 .
Effects of Inflation
We do not believe that inflation or changing prices had a significant impact on
our results of operations for any periods presented herein.
Off-Balance
Sheet Arrangements
We did not have during the periods presented, and we are currently not party to,
any
off-balance
sheet arrangements.
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